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In this article we will take a look at whether hedge funds think Dorchester Minerals LP (NASDAQ:DMLP) is a good investment right now. We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, unconventional data sources, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably, but their consensus stock picks historically outperformed the market after adjusting for known risk factors.
Is Dorchester Minerals (DMLP) a good stock to buy now? DMLP has seen a decrease in hedge fund sentiment in recent months. Dorchester Minerals LP (NASDAQ:DMLP) was in 5 hedge funds' portfolios at the end of the third quarter of 2020. The all time high for this statistics is 8. There were 6 hedge funds in our database with DMLP holdings at the end of June. Our calculations also showed that DMLP isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks).
Video: Watch our video about the top 5 most popular hedge fund stocks.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 66 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 13% through November 17th. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Chuck Royce of Royce & AssociatesChuck Royce
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. Keeping this in mind we're going to check out the fresh hedge fund action encompassing Dorchester Minerals LP (NASDAQ:DMLP).
How are hedge funds trading Dorchester Minerals LP (NASDAQ:DMLP)?
Heading into the fourth quarter of 2020, a total of 5 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -17% from the second quarter of 2020. Below, you can check out the change in hedge fund sentiment towards DMLP over the last 21 quarters. With the smart money's capital changing hands, there exists a select group of noteworthy hedge fund managers who were increasing their holdings significantly (or already accumulated large positions).
Among these funds, Horizon Asset Management held the most valuable stake in Dorchester Minerals LP (NASDAQ:DMLP), which was worth $7.9 million at the end of the third quarter. On the second spot was Royce & Associates which amassed $5 million worth of shares. Arrowstreet Capital, Lucas Capital Management, and Citadel Investment Group were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Lucas Capital Management allocated the biggest weight to Dorchester Minerals LP (NASDAQ:DMLP), around 0.4% of its 13F portfolio. Horizon Asset Management is also relatively very bullish on the stock, setting aside 0.32 percent of its 13F equity portfolio to DMLP.
We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Citadel Investment Group. One hedge fund selling its entire position doesn't always imply a bearish intent. Theoretically a hedge fund may decide to sell a promising position in order to invest the proceeds in a more promising idea. However, we don't think this is the case in this case because none of the 750+ hedge funds tracked by Insider Monkey identified DMLP as a viable investment and initiated a position in the stock.
Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as Dorchester Minerals LP (NASDAQ:DMLP) but similarly valued. These stocks are Chatham Lodging Trust (NYSE:CLDT), Village Super Market, Inc. (NASDAQ:VLGEA), Corporacion America Airports SA (NYSE:CAAP), Cellular Biomedicine Group, Inc. (NASDAQ:CBMG), Superior Group of Companies, Inc. (NASDAQ:SGC), Fortress Biotech Inc (NASDAQ:FBIO), and Bluegreen Vacations Corporation (NYSE:BXG). This group of stocks' market caps are closest to DMLP's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CLDT,12,29274,-2 VLGEA,10,28608,2 CAAP,4,4063,-3 CBMG,7,18005,3 SGC,6,9509,2 FBIO,8,48680,2 BXG,5,1706,-3 Average,7.4,19978,0.1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 7.4 hedge funds with bullish positions and the average amount invested in these stocks was $20 million. That figure was $14 million in DMLP's case. Chatham Lodging Trust (NYSE:CLDT) is the most popular stock in this table. On the other hand Corporacion America Airports SA (NYSE:CAAP) is the least popular one with only 4 bullish hedge fund positions. Dorchester Minerals LP (NASDAQ:DMLP) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for DMLP is 29. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 30.7% in 2020 through November 27th and still beat the market by 16.1 percentage points. A small number of hedge funds were also right about betting on DMLP as the stock returned 17.4% since the end of the third quarter (through 11/27) and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.